Costco and Target are primed for growth, experts say

According to participants in Supermarket News' 23rd annual Financial Analysts' Roundtable, warehouse clubs, specifically Costco, may be primed for a growth surge.

Wolfe Research Managing Director Scott Mushkin said that Costco's broad mix of offerings make it a big draw.

"Costco, over time, has created more and more reasons to pay for that membership," Mushkin said. "It's an incredibly positive business model."

"They are probably the best merchants of any retailer I've ever covered," added Karen Short, managing director for equity research at Barclays Capital. "They keep pushing the envelope and keep pushing their vendors, and the deals and price point just keep getting better and better."

As for BJ's Wholesale Club, Mushkin had a negative outlook. "If there were a Costco and a BJ's next to each other, it doesn't make any rational sense to actually have a membership to BJ's because the offering is so much more extensive at Costco and the savings are better," he said.

The participants also singled out Target, which they believe could be a sleeping giant in grocery if it continues to improve its fresh offering and out-of-stocks, and improves on its execution. The panel cited Target's strong private labels and the company's ability to develop innovative departments and merchandising.

BJ's expands Instacart partnership

BJ's Wholesale Club, which has been marketing heavily to Sam's Club customers since the Walmart-owned company closed several stores, has expanded its same-day delivery agreement with Instacart and will soon offer the service from all 215 stores.

Instacart also recently expanded its partnership with Costco, Kroger and Aldi. According to Kroger, two-thirds of its customers now have access to delivery and/or curbside pickup.

ShopRite tops in New Jersey with 139 stores

A story on NJ.com last month listed the 10 biggest supermarket chains (by number of stores) in New Jersey. Here's the list.

ShopRite - 139 stores
Acme - 77
Stop & Shop - 61
Target - 44
Aldi - 42
Walmart - 29
BJ's Wholesale Club - 23
Kings Food Market - 23
Save-A-Lot - 22
Key Food - 22

Stores in New Jersey with fewer locations include Whole Foods, Trader Joe's, Wegmans, Weis Markets, and soon... Lidl.

BJ's may be looking to sell or go public

A report in the Wall Street Journal last month stated that the private equity firms that own BJ's Wholesale Club could either be trying to sell the company or planning for an IPO.

Leonard Green and Partners and CVC Capital Partners acquired BJ's in 2011 for about $2.8 billion. At the time, it was reported that Walmart made an offer for BJ's but was rejected.

An analyst at Kantar Retail noted that although more and more BJ's shoppers have been cross-shopping on Amazon and limited-assortment discounters are eroding the uniqueness of the warehouse club's value proposition, BJ's has shown signs of improvement since CEO Chris Baldwin took over last February.

Baldwin has focused on five key pillars: smart saving families; improving value perception; driving member engagement and retention; revitalizing the general merchandise assortment; and increasing its response speed by improving processes.

BJ's currently operates 213 clubs. Although analysts think Costco and Sam's Club could be curious about acquiring BJ's, they believe it's unlikely either company would make such a large investment in physical stores.

Giant to close Warrington, PA store

Giant announced last week that it is closing its Warrington, PA store on November 2. The store was a former Genuardi's supermarket that Giant purchased in 2010.

The 49,000 square foot store is in PREIT's Creekview Shopping Center. Co-tenants include Lowe's, Target and LA Fitness. Wegmans and BJ's Wholesale Club have stores within a half mile of the shopping center, and there is ShopRite and another Giant store 2.5 miles to the southeast.

BJ's opens 200th store, still way behind Costco and Sam's Club

BJ's Wholesale Club opened its 200th store last week in Fayetteville, NC, which prompted me to see how many stores Costco and Sam's Club have. Here's a quick comparison:

• BJ's - 200 stores in 15 states
• Costco - 627 total stores; 449 in the U.S. and Puerto Rico, 85 in Canada and 93 in other countries
• Sam's Club - about 721 +/- total stores; 621 in the U.S. and Canada, and about 100 in other countries.

There you have it.

Report says supermarkets gained share on warehouse clubs last year

A study released last week by DSR Marketing System claimed that U.S. supermarkets gained market share against warehouse clubs (i.e. Costco, BJ's) and superstores (i.e. Walmart, Target) in 2012.

The study showed that supermarkets owned a 59.3% share of grocery sales, up 0.4% from 2011. At the same time, the share of grocery sales for warehouse clubs and supercenters decreased 0.4% to 22.6%.

According to DSR, the share increase for supermarkets reflects the impact of fast-growing food retail concepts like Aldi, Kroger, Publix, Wegmans and Whole Foods, as well as closures at Kmart and slower relative growth of warehouse clubs. The company also noted that the aging population helps smaller format stores like supermarkets, since older shoppers generally dislike larger stores. (And older shoppers don't need a three-year supply of ketchup and Cheese-Its, like my family apparently does.)

Philly's fragmented market weeding out "losers"

A recent story in the Supermarket News says that Philadelphia's grocery landscape is "largely being written by its losers." And by losers Supermarket News means Genuardi's, Acme and A&P (Pathmark, SuperFresh).

Genuardi's is down to one store, and the exit of the once mighty brand set the stage for Giant to compete with ShopRite as the market's leading grocer. No one is sure yet what will happen to Acme, which is now part of the investor group led by Cerberus, and A&P continues to struggle.

Bob Gorland of Matthew P. Casey & Associates claims that no other metro area in the entire U.S. has as many chain and strong independent operators as Philadelphia, noting that every major club store and drug chain is here, not to mention "numerous price operators of all shapes and sizes."

The result is a fragmented market, with "losers" giving way to gainers like Giant, ShopRite, Wegmans, Walmart and Bottom Dollar. And the biggest opportunities ahead, according to Gorland, are for the stronger competitors to take over the weaker ones.

Below are the market share leaders for the 11-county Philadelphia market, according to Metro Market Studies, a firm based in Tuscon, AZ.

Note that this is a faulty list, as ShopRite is listed by operator, not as one brand. Last June's Food Trade News market study listed ShopRite as the clear market leader of the 15-county Delaware Valley.

Giant - 15.1%
Acme - 14.9%
Walmart - 5.9%
Pathmark - 5.6%
BJ's - 4.9%
Costco - 4.7%
Wawa - 4.6%
Wegmans - 4.0%
Brown's ShopRite - 3.6%
Zallie ShopRite - 3.1%

Walmart less threatening to supermarkets than it used to be

Supermarket News asks food retailers every year "which alternative channel has posed the biggest threat to Center Store sales in supermarkets?" Walmart has consistently remained the top threat, but the fear they put into supermarket competitors is obviously diminishing.

In 2009, 64% of respondents listed Walmart as the number one threat. In 2010, 50% of respondents answered the same way, and last year, the percentage fell to 45.3%. In the most recent survey, Walmart's total fell to 34%.

Dollar stores have emerged as a significant threat to supermarkets, as 22.6% of respondents listed them in the top spot. Last year dollar stores received only 17% of the votes.

Club stores (Costco, BJ's) and limited assortment discounters (Save-A-Lot, Aldi) finished third and fourth, respectively.